What are the expected effects of the $371 million cash payment and $184 million stock issuance on Skyward Specialty’s capital structure and dilution?
Capital‑structure impact
$371 million cash outflow will be funded largely by the “committed debt financing” mentioned in the filing. Adding this senior‑senior or term debt will raise Skyward’s leverage ratio (Debt / Equity) and the net‑interest‑coverage ratio will tighten until the newly‑added Apollo cash‑generating book begins to repay the loan. In other words, the balance sheet will shift from a relatively low‑‑debt, equity‑clean insurer to a slightly more leveraged, cash‑heavy one. Because the cash component is not equity‑based, it does not dilute existing shareholders, but it does create a larger fixed‑cost obligation that will have to be serviced out of operating earnings.
$184 million stock consideration translates into an immediate increase in the number of Skyward shares outstanding. Assuming a post‑deal price in the $30‑$35 range (the stock has been trading in a tight $28‑$36 band over the past month), the $184 million issuance would represent roughly 5‑6 % of the pre‑transaction float (≈3.5 million shares). Existing shareholders therefore face a modest dilution of their ownership stake and a slight expansion of the denominator in earnings‑per‑share calculations. However, the management’s EPS‑accretion guidance—double‑digit adjusted operating EPS accretion in year 1—implies that the incremental earnings from Apollo should more than offset the dilution effect, leaving adjusted EPS higher on a per‑share basis after the transaction.
Trading outlook
From a fundamentals standpoint, the deal is projected to add >$1.5 bn of managed premiums and produce EPS accretion, which is a positive catalyst for the stock. The dilution from the 5‑6 % share increase is relatively mild and should be largely absorbed by the higher earnings base, keeping the price‑to‑earnings multiple stable or even slightly compressed. Technically, Skyward has been holding a bullish pattern on the 4‑hour and daily charts (higher highs and higher lows since early August) and has found support around $30. If the market prices in the modest dilution and the additional leverage, we could see the stock hold or modestly rise toward the $33‑$35 zone in the next 4–6 weeks as the acquisition terms are finalized and the first‑quarter post‑closing earnings outlook is clarified.
Actionable signal – With the acquisition still a few weeks away, consider a light‑to‑moderate long position or a buy‑on‑dip if the price retests the $30 support and shows sustained volume, keeping the upside target near $35. A protective stop just below $28 would guard against any unforeseen leverage‑related downside if the debt load pressures cash‑flow in the early post‑closing months.